The European Central Bank has once again delayed any concrete measures to stop the eurozone sliding towards deflation but indicated action in June, and issued a stark warning about the euro exchange rate.

“The strengthening of the euro in the context of low inflation and still low levels of economic activity is a serious concern,” said Mario Draghi, the ECB’s president, in the clearest bid yet to talk down the currency. “The exchange rate will have to be addressed.”

His comments sent the euro tumbling a cent to $1.3852 against the dollar — although this is still close to the pain barrier of $1.40.

Mr Draghi said huge inflows from Russia and the rest of the world have pushed the euro too high for an economy struggling to recover. The effect is to tighten the deflationary noose on Europe.

It widely suspected that China has been buying euro bonds to hold down the yuan but there are other forces at work, including moves by European banks to repatriate some of their $4 trillion (£2.4 trillion) holdings to shore up capital ratios at home.

The eurozone current account surplus reached 3.6pc of GDP in the last quarter of 2013, which is pushing the currency higher. Hans Redeker, currency chief at Morgan Stanley, said efforts to talk down the euro against these powerful forces have failed repeatedly. “It will take QE to really weaken the euro,” he said.

Mr Draghi said the governing council is perplexed by the relentless slippage in the inflation rate.

It is examining whether there are deep global causes that go beyond the recent fall in energy and food prices. “There is consensus about being dissatisfied with the projected path of inflation, in not being resigned to this and accepting this as a fact of nature,” he said.

Mr Draghi said the ECB is “comfortable with acting next month” once staff have prepared the next set of projections in June. Analysts say this is likely to be a cut in the discount rate or other forms of tinkering rather than the €1 trillion (£820bn) plan for quantitative easing floated in the German press.

“The ECB seems to be offering a token rate cut in June,” said Dario Perkins, from Lombard Street Research. This may leave bond and equity markets vulnerable to a correction since they have already “priced in QE”.

Mr Perkins said the ECB risks falling behind the curve as deflation spreads from Europe’s periphery to the core, repeating errors made by the Bank of Japan in the mid-1990. “The governing council is clinging to its belief the economy will continue to recover and that the deflation threat will subside,” he said.

Eurozone inflation reached 0.5pc in March, though RBS says the underlying rate was 0.3pc once austerity taxes are stripped out. It jumped back up to 0.7pc in April but is expected to slip again in May. It is clearly far off the ECB’s 2pc target. Several countries are in outright deflation already, including Spain, where the “GDP deflator” has reached -0.4pc.

Jonathan Portes, head of the National Institute of Economic and Social Research, said eurozone inflation is likely to hover near 0.2pc this year, one shock away from a deflation trap. “Economics clearly dictate that you have to do something: QE or some other unconventional monetary policy. Obviously there are political and institutional reasons why they may choose not to,” he said.

Mr Draghi acknowledged in a recent speech that low inflation makes it much harder for southern European countries to claw back competiveness within the EMU, but it is difficult for him to act without a green light from the Bundesbank, which is more worried about a German house price boom.

Inflation has been so low in Italy and Spain that nominal GDP contracted last year. This plays havoc with debt dynamics, automatically lifting the ratio of debt to GDP and pushing these countries closer to a compound interest trap.

Although the ECB has cut rates to 0.25pc, the bank has at the same time allowed passive tightening - or “endogenous tapering” - as banks repay their money borrowed during the crisis, mostly to shake off stigma or prepare for stress tests this year. Silvia Merler, from the Brussels think tank Bruegel, said the ECB has lost control of its balance sheet, which has shrunk by €700bn since early 2012. Excess liquidity has evaporated. “The time has come for truly unconventional monetary policy,” she said.

EU officials insist that the eurozone can reach sustainable recovery even though private credit is contracting by 2.2pc, quoting an academic paper on “creditless recoveries”.

However, the key episodes cited include the UK, Italy and Spain after they left the exchange rate mechanism in the Nineties, and Scandinavian states after their banking crises. The common theme was a steep devaluation, averaging 14pc. There is no such Deus ex Machina on offer for the eurozone.